Most Americans dream of home ownership. It seems to be the American Dream. Keep in mind…..home ownership may not be for everyone. What works for one person, may not work for the next. In 2021, Statistics showed, nearly two thirds of millennials regret home ownership. Why? I believe many rush into this journey without properly understanding how huge of a commitment one will have to make. They don’t understand how much money it will cost to keep up with maintaining the home. A 30- year mortgage is a huge commitment. It can be overwhelming for many young adults. I want to share pros and cons for renting vs homeownership.
Homeownership
Pros
*Good for married couples, single parents, single individuals with stable income and couples with children
*Freedom of maintaining your own home without outside control
*Your monthly bills will be less than renting if you secure the right loan; the higher your credit score, the better the rates
*You can add on to your home freely
*Your home will create equity( money you can pull out for personal use, emergencies
Cons
*Difficult to move and to sell the home immediately
*Extra cost, maintenance
*Majority of payments the first few years will go towards interest
Renting
Pros
*Good for single mothers and single people who live alone
*Can get up and relocate when contract is up
*You don’t have to worry about yard and building maintenance on your own
*No property tax to worry about
Cons
*Might have to deal with loud neighbors
*Paying for someone else’s assets
*Landlord always have rules set in place
Another Alternative- Fixer Upper
During this pandemic, life is becoming more unpredictable. Many people have been laid off their job, business have closed or went into bankruptcy. If you have a nice savings account, find a fixer upper home and do some renovations. You can live in that until you are ready to buy a home. You won’t have to worry about anyone taking your home. It was paid for with cash. Once, you are ready to purchase a new home, you can rent that renovated home out and collect monthly payments. Use that money tp pay the new mortgage.
So what is best for you? It is up to you. Never let anyone pressure you into making any huge financial purchases. You must be ready to tackle a huge commitment; such as a home. You have to ask yourself some important questions. Are you planning to stay at the same location for the next 30 years? Do you have a good credit score to get approved for a mortgage with the best rate? Do you make enough money to be able to make the monthly payments? Are you prepared to accept the fact that there may be other expenses associated with owning a home? Renting isn’t bad either. Definitely do your research and find a good realtor who will make this journey smooth for you.
Road Map To Home ownership :
Step 1: Request a copy of your credit report.
Step 2: Begin analyzing your report and repairing your credit. Rebuild your credit with credit building tools.
Step 3 : Understand Debt-Income ratio. If your debt is greater than your income, create a plan to start reducing your balances.
Step 4 :
- Research different types of loans.
- View listings
Step 5 :
- Get in contact with a Realtor or lender.
- Ask plenty of questions
- Take Notes
More questions to ask yourself:
- Do i have at least 2 years of employment or 2 years in the same field?
- Do i have enough for a down payment?
New update on student loans and Debt- Income :
FHA announced in June 2021, it will now calculate monthly obligations for those with income adjusted payments in deferment based on 0.5% of outstanding student loan balance. Previously, FHA had used 1% of the outstanding student loan amount in debt-to-income calculations to determine whether consumers that had them could qualify for a mortgage.
